International Employment – China – Hongjuan Bai

We advise employers on full spectrum of labour and employment issues from hiring to firing, including (a) structure of employment relationships, employee remuneration and benefits, establishment and enforcement of company policies, workplace harassment and discrimination, post-termination restrictive covenants, employment-related due diligence, (b) reduction in workforce, employee transfer and employee settlement in case of M&A, liquidation and various business transactions, (c) workplace privacy policies and data protection, and (d) issues relating to trade union and employee representative bodies.

We also represent our clients in complex labour and employment litigations. With around 18 years of experience, deep understanding in local judicial practice, and strong support of a big team consisting of members in various cities in China, we can provide practical advice that goes beyond mere legal interpretation.

One common issue recently faced by employers is the social insurance contribution location. Many and more cities are prohibiting non-locally-registered company paying social insurances through labour agencies in their cities, which is challenging for employers who have very limited entities but employ workers all over China. Such employers should closely monitor such changes and be prepared for the possible options.

Another frequently seen issue is relating to employee transfer between different entities (due to business restructure or for the purpose of above-mentioned social insurance compliance requirement) and reduction in force as part of business transactions or restructures.

The most complexity may be the termination of employment. At-will employment is not allowed in China; any unilateral termination by employers shall be justified by a legal ground provided by the law, and employee may claim reinstatement of employment against a wrongful termination.

All employers must sign employment contracts with their full-time employees.

We assist our clients on both individual separation and mass layoffs, through analysing termination options, developing communication strategies, and assisting in communication with individuals and authorities (if needed), and handling labour disputes.

Yes, remote or hybrid working is seen to increase mainly within foreign invested companies. Remote work makes it more difficult to monitor work attendance, identify work-related injury, and protect confidential information of employer. Employers should work on detailed policy to address such issues, possibly with necessary technical support.

Non-competition is allowed and commonly used in certain industries such as technology industry. It is a must for employers to pay compensation for employee’s performance of non-compete obligations. In turn, the parties may agree on liquidated damages that the former employee shall pay to the employer in case of his/her breach of non-compete obligations.

One key issue is the criteria of identifying competing business. In the past, some courts may simply compare the registered business scope of the former and new employer. Yet a recent guiding case released by the Supreme Court has provided a more stringent criteria, which suggests review of any overlap of actual (versus registered) business scope and target customers/clients/markets, for the purpose of avoiding extensive interpretation of competing business and prevention of talents flow that may be caused.

Yes. The Civil Code, effective from Jan. 1, 2021, has for the first time prohibited sexual harassment on the level of national law. The PRC Law on Protection of Rights and Interests of Women, as amended in 2022, has further provided specific obligations with which employers must comply to prevent sexual harassment of women in the workplace, including without limitation, formulating rules and systems that prohibit sexual harassment, conducting education and training activities, making employees aware of the means through which complaints can be raised (e.g., phone numbers and mailboxes), establishing and improving investigation and resolution procedures. The law also requires employers to handle complaints in a timely manner and notify the aggrieved women in writing of their findings. Harassed employees may directly file a sexual harassment litigation case at the court.

The PRC Personal Information Protection Law, effective from 1 Nov. 2021, provides various principles, basis, and purposes of personal information processing, and sets forth various requirements for compliance. It is foreseen that more regulations may follow to stipulate on related details; and one of the key issues would be the cross-border transfer of personal information. Employers may need to update their policies and take necessary measures to be compliant with the legal requirements.

One issue worthy of attention is regarding the judicial practice on RSU /stock option disputes. When the employment contract is terminated by the domestic employer, the RSU or stock options granted to the employee by the foreign company will be forfeited. Therefore, some employees will sue the Chinese employer to compensate for the losses caused by such forfeiture. On the other hand, some employees claim that the equity incentive related income is part of their labour remuneration and should be included in the calculation of unused annual leave compensation and severance pay. At present, there is a fierce debate on this in judicial practice, but some judges tend to support the employee’s claims if equity incentives are provided based on factors such as labour relationship and work performance. Disconnection of the equity incentive from the domestic employer, through well-structured documents, might help to mitigate the risk.

The complexity is often that the company needs to address the local union’s pressure of unionization within the company. We assist clients to analyse the legal issues and work together on handling strategies.

We are the sole China member firm of the Employment Law Alliance (ELA), a global network of labour and employment lawyers.

In addition, we have opened fully licensed offices in Hong Kong, New York, and Silicon Valley. We are also the only Chinese law firm to be accepted for membership in Lex Mundi and Multilaw and have established ‘best friend’ relationships with many other preeminent local law firms. Through such alliances, we are able to extend our premier legal services efficiently and consistently to clients based in other jurisdictions.